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October 08, 2018

Housing Sentiment Dips Slightly on Interest Rate Concerns

Matthew Classick

202-752-3662

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased slightly in September, falling 0.3 points to 87.7, reversing August’s increase. The dip can be attributed to decreases in three of the six components, including the mortgage rate and household income components. The net share of Americans who said it is a good time to buy a home rose by 5 percentage points, while the net share who said it is a good time to sell a home remained unchanged. However, the net share who expect mortgage rates to go down over the next 12 months fell 4 percentage points, and the net share of survey respondents who said their household income is significantly higher than it was 12 months ago decreased 3 percentage points. Respondents also expressed a slightly more pessimistic view on job security, with the net share confident about not losing their job falling by 1 percentage point. Finally, the net share of respondents who said that home prices will go up in the next 12 months increased 1 percentage point.

“HPSI remains flat this month as perceptions of high home prices and expectations for rising mortgage rates continue to weigh on potential homebuyers,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “In September, the average 30-year fixed mortgage rate increased for the second consecutive month to 4.63 percent, its highest level since May 2011. In addition, the Federal Open Market Committee members’ interest rate projections at the September meeting continued to point to four additional rate increases between now and the end of 2019. Still, downside risk to housing is limited by broader economic strength, which helped boost perceptions of current home buying conditions. For consumers who say now is a good time to buy, the share citing overall economic conditions as a reason rose to a survey high.”

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae’s 2018 Home Purchase Sentiment Index (HPSI) decreased in September by 0.3 points to 87.7. The HPSI is down 0.6 points compared with the same time last year.

The net share of Americans who say it is a good time to buy a home rose 5 percentage points from last month to 26%.

The net share of those who say it is a good time to sell a home remained unchanged this month at 38%.

The net share of those who say home prices will go up rose 1 percentage point to 39%, remaining below 40% for the third consecutive month for the first time since December 2016.

The net share of Americans who say mortgage rates will go down over the next 12 months dropped 4 percentage points to -56%.

The net share of Americans who say they are not concerned about losing their job fell 1 percentage point to 79%.

The net share of those who say their household income is significantly higher than it was 12 months ago fell 3 percentage points to 19%.

ABOUT FANNIE MAE’S HOME PURCHASE SENTIMENT INDEX

The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

ABOUT FANNIE MAE’S NATIONAL HOUSING SURVEY

The most detailed consumer attitudinal survey of its kind, Fannie Mae’s National Housing Survey (NHS) polled approximately 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 70 percent of respondents via their cell phones (as of January 2018). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The September 2018 National Housing Survey was conducted between September 1, 2018 and September 27, 2018. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by PSB, in coordination with Fannie Mae.

DETAILED HPSI & NHS FINDINGS

For detailed findings from the September 2018 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.